By a show of hands, how many people think that personal finance and investing is complicated?

Most people have never been formally taught about personal finance or investing, and that’s exactly how Wall Street likes it. Lucky for all of you, it’s actually much simpler than you think.

There are all types of things you could invest in, for this article I’ll focus on the stock market since that is the most readily available investing vehicle, and it has a multi-century track record of giving great returns to investors.

But isn’t the stock market risky?

If I had a dollar for every time I’ve heard, “my ‘so-and-so’ lost everything in the 2008 recession,” I would have a lot of dollars. The thing to understand about the stock market is that it is volatile year-by-year, but over the long-term, it is the most proven investment vehicle (alongside real estate). That means, your money might go down in value next year, but there has never been a 10-year period in the stock market that you did not make money, and most 10-year periods have delivered huge returns.


To put this into perspective, if you had the absolute worst timing EVER and invested all of your money in the S&P 500 in October 2007, the day before it began it’s ~50% decline. If you just held the stock and didn’t sell, in late 2017 (10 years later) you would have doubled your money. “So you’re telling me, that even with the worst timing ever, I could have still doubled my money in the stock market if I just waited patiently and didn’t freak out?” Yep, that’s exactly what I’m telling you!

What is the stock market

When you invest in the stock market, you are putting your money into actual companies that are going to work to make you more money. Any time you buy a stock in Amazon, you are trusting in the vision and leadership of Jeff Bezos (the Founder and CEO of Amazon) to continue to grow Amazon and make the company more valuable. He works hard to make himself more money, which actually makes you money as well… not a bad arrangement.

This all sounds great, but now people are wondering, “what stocks do I invest in?” and we’re back to the same confusion of where we began.

The Solution

I’m going to solve this question for you right here, right now, by giving you 3 simple recommendations.

Solution #1 (Recommended solution to new investors)

Questions to determine if this solution is right for you:

  • Are you new to investing?
  • Do you have any interest in learning about the stock market?
  • Do you want to spend time learning more about investing?
  • Do you want the easiest possible investing solution? (which coincidentally might be the best solution)

If you answered yes to those questions then this solution is for you.

The company Vanguard has been disrupting the investing landscape for decades by creating low-cost funds. The goal of many of these funds is to not to try to time or beat the market, but rather just match market returns, and that’s not half bad considering the market has returned 8-9% annually on average over the long-term. To give you some perspective, the money sitting in your bank account is probably giving you a return of 0.02%, which means the market should beat your savings account by at least 400x!

Vanguard has an excellent fund called the Vanguard Total Stock Market fund (symbol VTSAX).

By purchasing this fund, you can envision that you are literally buying a small piece of every company in the stock market. You will own some Apple, Amazon, and Facebook, but also many smaller companies you’ve probably never heard of before.

By purchasing shares in this fund you can expect 7-9% returns long-term, and you literally never have to spend another second thinking about investments ever again. You can open an account with Vanguard or M1 Finance and set up an automatic contribution every month and have 100% of the money go into VTSAX.

Please don’t let the complications around investing prevent you from putting your money to work. Start today by letting your money begin to work for you with this simple, yet comprehensive solution.

You can get set up and start investing in no more than 30 minutes. Make this happen as soon as possible and your future self will thank you.

Solution #2 (Recommended for more experienced/interested investors)

Questions to determine if this solution is right for you:

  • Do you have an interest in trying to get a slightly higher return than the market average?
  • Are you willing to put in a little more work to do so? (luckily, it’s not much more work than Solution #1)

If you answered yes to those questions, then this solution might be right for you. Of course, you could just stick your money into a total stock market fund and that would be fine, but it’s not going to allow you to exceed market returns since you literally own the market (broadly speaking).

For Solution #2 you will be buying some additional funds that have the opportunity to beat market averages, based on historical returns. This is the best time to say that past performance is no indication of future results, and that’s why the market is a tricky thing to figure out. By adding more asset classes to your portfolio, it also helps to smooth the path (assuming they’re not correlated).

Below is an example of a non-correlated portfolio, when you need sunscreen (sunny weather) you don’t need an umbrella (rainy weather). When one “stock” goes up, the other goes down, but because you own half of each you have a nice smooth ride up.


To pursue this strategy you would identify funds (ideally low-cost Index Funds), and decide on an ideal allocation. There are all different types of funds you could pick, but some of the best performing asset classes over time have been Small-Cap Value, Large-Cap Value, Large-Cap Growth, REIT, and a solid bet for the future would be Emerging Markets.

Here’s an example of something you might pick:

  • 25% Total Stock Market
  • 25% Small-Cap Value
  • 25% Emerging Markets
  • 25% Total International

Feel free to adjust these target holdings and funds based on the research you conduct. I would suggest you include a Small Cap Value fund, as that has been the top performing asset class over the long-run. By adding funds like Small-Cap Value and Emerging Markets, you may have more risk in the short-term, but a decent probability of beating broad market returns in the long-term.

I like to use M1 Finance to maintain my target allocation percentages. Here is how I have my portfolio with M1 setup today:


As you can see, you don’t have to just pick a few funds, you can pick as many as you’d like, Vanguard funds are my favorite (if you couldn’t tell).

The key advice I can give you here is DO NOT CHANGE YOUR ALLOCATIONS BASED ON MARKET SWINGS. Hopefully, that was clear enough. While you need to maintain your target allocation over time (either by rebalancing your portfolio or purchasing underweighted funds), it is a huge mistake to swap funds in and out.

Let me give you an example, in the time after the 2008 recession, Emerging Markets were underperforming the market… for years. From 2010-2016 investors were hoping for Emerging Markets to finally break out, but it wasn’t happening. Many investors began to jump ship in hopes of finding greener pastures, only to see the fund deliver ~12% returns in 2016 and ~31% returns in 2017.

To reiterate, keep your account weighted properly, just be wary of getting out of a fund altogether because it has been “underperforming lately.” The reason why you rebalance is to buy low and sell high. As painful as it is to sell off some of your winners, to buy more of your losers, that is the way you can exceed average market returns.

Solution #3 (Not generally recommended as it’s hard to beat the market)

Questions to determine if this solution is right for you:

  • Do you love researching stocks and investments?
  • Do you have rock solid temperament?
  • Are you okay with spending a lot of time researching your investment strategy?

If you answered yes to these questions, then this might be the strategy for you. You are in the driver’s seat and you will pursue investment strategies you are most interested in.

If you want to proceed down this path, do so with caution. Rising tides lift all boats. When we’re in the midst of a Bull Market, too many people feel like they’re the next Warren Buffett when in all reality, it has basically been impossible to lose money. Make sure that your strategy is not going to cost you when the market does eventually go down.

Pick your strategy

And there you have it! Now you can pick the best solution for you based on your individual wants and needs. Remember that it’s incredibly difficult to beat the market, and it’s typically your behavior that will determine your investment success. The worst thing you can do is freak out and sell when things turn south. Be calm and weather the storm– you only lose when you sell.

Now that you know how to control your spending and how to invest, the next step is to know where to invest your money.

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